Withholding pay beyond legal minimum until release signed
Question: Can an employer provide the legal minimum of pay in lieu of notice for dismissal and then offer the equivalent common law notice in exchange for signing a release?
Answer: The simple answer is yes. A release is binding on an (ex)employee if sufficient consideration (payment) is provided to the employee in exchange for him providing the release. However, because employers are required by law to provide a proscribed legal minimum of pay in lieu of notice when dismissing an employee without cause, an employer cannot acquire a valid and binding release if it asks the employee to sign a release only in exchange for paying the statutory minimum pay in lieu of notice. An additional payment beyond the statutory minimum must be paid in order for a release to have sufficient consideration to be binding and valid.
Therefore, if an employer wishes to acquire a binding release, it must pay some sum of money in excess of the statutory minimum pay in lieu of notice in exchange for the release. That “excess payment” does not have to be equivalent to the statutory notice — it can be any amount that is paid in excess of the statutory minimum. While common law notice includes the minimum statutory notice, it is the amount of money paid in excess of the minimum statutory notice that makes the release binding. For example, if the minimum statutory notice is four weeks, and the common law notice is 16 weeks, then it is the 12 weeks paid in excess of the statutory notice which constitute consideration to bind the employee pursuant to the terms of the release.
In other words, if an employer wants a binding release, it must pay more than the statutory minimum pay in lieu of notice to the employee in exchange for the release.
